Tuesday, January 4, 2011

Due-Diligence: Developing a Product Offshore (Info, Material, Price)

Don't Expect Factory to do Research, Legwork
~ Do in Planning Stages

Here’s a list of basic steps in sourcing a customized item or developing a non-existing product. This stuff is very basic but easy to overlook and with the frequency I see overseas importers/buyers not do this, you would think it’s rocket science.

Keep in mind non-existing could mean an item the factory doesn’t currently produce (non-existing to the factory’s capabilities) and for them it will be a first-time run. Also this could mean tweaking an existing product but requiring quite a bit of change, creativity and design legwork.

Internet Research, Visuals, Videos of Functionality, Blue Prints:

Is what you’re requesting the factory to do already existing in the market somewhere in the World?

Is there anything similar out there you can show the factory for reference?

Have you sent over website references, photos, blueprints, designs, etc…?

Don’t expect your factory to do web research for you; won’t happen. If the project wasn’t important enough for you to compile info and send over, it also won’t be important for them to compile info.

Also independent self-educating research is not widely done here. Not that they’re not capable, but they don’t know the value in it. In China, the mind set is different; if something isn’t known, the individual largely considers it to be an “unknown”. The attitude of “I don’t know the answer but will work hard and strive until I find the answer” doesn’t exist. Most folks on the totem pole are waiting for a higher-up to tell them what they need to do.

“This project isn’t very solid but I want you to start investing time and energy into it.”

Even if you’re not sure what the materials are, you should be able to propose possibilities of material to use. Give the factory some options to consider. Factories are not high in the “free-thinking” category, but if you give them a starter foundation, they will then be motivated to “pick up the ball and run with it” as we say back home.

Target price:

Are you able to give the factory a target price? Some price reference they can work around?

My personal advice (after 9+ years of doing this), is before you reach out across the globe to check on the production of a product, get the input from local suppliers. Collect their pricing and then use it as a point of referral for the offshore quote. If you don’t want to work in this matter, then do the necessary legwork in checking price; how much is the competition selling like or similar products? How much is your local retailer selling it? If you got contacts in the industry; network with them and find out their thoughts on pricing, etc….

(Is that unethical to gather info from a local supplier and then use it as info to develop offshore? I don’t know, but many of you importers do vice versa all the time, so if you consider it unethical for the local suppliers to feed you with info, then it’s just as unethical to do it to offshore suppliers…right?)

ANYTHING is better than nothing. Nothing is worse than doing all the upfront legwork on product development and then quoting a client and then client says “price won’t work.” At JLmade, we either do the legwork ourselves (which delays the quoting process if client hasn’t already done it) or depending on current work volume, we’ll ask the client to get back to us after proper pricing research.

Also keep in mind; it’s not a “cat and mouse game”. I don’t recommend withholding the price from the factory to see if they quote better. First off, that’s simply playing games and wasting time. Secondly and almost more critical for your end, if they quote lower, there is a high possibility that you’re not talking “apples and apples”, thus you’re going to move forward on an inferior quality product and waste time, capital and energy. Not to mention the disaster that could stem from bad quality.

Obviously we could all put our heads together and list more “due diligence” steps and I will do so in future posts.

I hope you’ll feel free to comment and let me know some additional ideas and help to educate the folks that visit this blog. The point of the steps is to save time for both buyer and factory side. Doing the proper upfront steps will allow you, the buyer to know if this project is workable, gives a professional presentation to the factory, thus motivating factory to team up with you on this project. So whether or not the project goes to full fruition, it’s was tackled professionally and now you and the factory have a good working relationship between you.